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Reverse Logistics For A Forward Thrust To Sustainment Quotient

One of the key technology focus areas in Green Supply Chain Management that enables an organization to transition into a sustainable organization is Supply Chain Network.  Logistics Optimization also goes hand in hand with this. It is true beyond doubt that a responsive supply chain is also a responsible supply chain, it is more environmentally and socially responsible. Not only is it plausible it is also more financially viable resulting in a higher sustainment quotient as well as higher benefit factor. Logistics Optimization and Supply Chain Network can lead to reductions in empty and circuitous miles, and also increased warehouse capacity utilization. Organizations need to look at the process and operational best practices to improve upon their sustainment quotient. The higher the quotient, the greener the supply chain and hence the greener the dividend pastures as mentioned earlier.

One of the key tenets of Supply Chain Network and Logistics Optimization is Reverse Logistics. Reverse logistics is characterized by supply uncertainty as opposed to Forward Logistics. Reverse logistics is not forecast and demand driven. Organizations can't predict which products are going to be returned, their condition and when. 

Reverse Logistics relates to managing returned goods and their disposition, improving organization's ability to turn damaged goods into sellable goods after refurbishments. Due to strict norms for disposition of goods that are prevalent in the retail and distribution industry (like WEEE, RoHS) it is imperative that we focus on this from a strategic viewpoint.  Organizations that practice reverse logistics processes can significantly reduce the waste generation and increase opportunities to re-introduce returned products to market. This is desirable both economically and ecologically.

I would like to spell out encore the probabilistic function that I had mentioned in one of my previous blogs.

Probability(Returns) = XF(Decrease in demand) +YF(Incorrect forecast) + ZF(Damage in transport) +AF(Quality issues) + BF(Stores inability to sell) + CF(Incorrect promotions).

World class organizations are trying to reach out for the point of minimum inflexion for this function. Hence, although the returns are unpredictable, the probability of its occurrence can be minimized for best results. Also with effective management of reverse logistics within the supply chain, the levels of greenhouse gas emissions can also be kept under a check. Oracle Applications provide niche modules/functions that support reverse logistics processes. Some of these are:

·         Depot repair

·         Spares Management

·         OTM


These modules include features that address issues like surplus identification per threshold levels, enhanced routing algorithm to determine the destination of return, excess returns handling prioritization using business rules and strategies (via rules engine) per impact on inventory value. Effective implementation of these technology capabilities will result in reducing an organization's carbon footprint and addressing the business imperatives. They also help in repair management, re-manufacturing, re-assembly and reuse of salvaged components. We will discuss more on these business functions and technology capabilities in further threads, but the underlying fact remains that "Green is the color of money as Green is the vein of supply chain".


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